RIL’s Q4 to be driven by sustained momentum in retail business, O2C to see modest growth

• Mukesh Ambani-led Reliance Industries’ Q4 is expected to be driven by sustained momentum in the retail business.
• Reliance’s O2C business, which is its bread and butter, is expected to post a modest uptick in Q4 after a subdued performance in the previous quarter.
• Amongst the key aspects to watch out for in Reliance’s March quarter earnings would be the company’s commentary on the demerger of Jio Financial Services, an uptick in its O2C business, telecom tariff hikes if any, and the retail store additions.

Mukesh Ambani-led Reliance Industries’ March-quarter results are expected to be driven by sustained momentum in the retail business. The oil-to-chemical business, which is Reliance’s bread and butter, is expected to post a modest uptick in the fourth quarter after a subdued performance in the previous quarter.

According to an average of brokerage estimates, Reliance Industries is seen posting a net profit of ₹17,421 crore, rising 7.6% on year, while its revenue is expected to marginally decline to ₹2.06 lakh crore for the quarter.


Source: Brokerages

“We expect Reliance to report Q4 FY23 earnings before interest, tax, depreciation and amortisation (EBITDA) of ₹37,800 crore, up 21% year-on-year and 7% quarter-on-quarter, with earnings expansion across the energy and consumer businesses,” said a report by UBS.

Oil-to-chemical business to see a modest uptick

The O2C business is Reliance’s bread and butter, and a modest uptick in this segment bodes well for the company. The brokerage consensus is that an uptick in demand will help the O2C business post a flat to modest uptick in Q4, with a marginal increase in petchem margins.

Reliance’s O2C segment was under stress in Q3 due to margin pressures as well as weak demand – its contribution to the company’s overall revenue falling to 65.6% in Q3 from 68.5% in Q2, and 72% in Q1.

“We estimate standalone EBITDA to rise 10% sequentially to ₹16,400 crore, reflecting 12% higher O2C EBITDA underpinned by higher petchem margins, moderation of the special additional excise duty (SAED) impact and broadly steady refining margins of $11 per barrel,” said a report by Nomura.

Retail to continue growing stronger

Reliance’s retail business is expected to continue on its path of sustained growth during Q4 as well, thanks to robust store additions.

This momentum is expected to reflect in healthy growth in the retail segment’s revenue as well, with analysts at ICICI Direct expecting a 20% YoY rise in revenue to ₹69,415 crore.

“Reliance Retail has surprised positively on aggressive floor space additions through the last three years of Covid-19, with retail floor space additions, warehouse additions, acquisition of brands, and the launch of newer verticals with Retail,” said global brokerage JP Morgan.

Reliance Retail has added 2,100 stores in the first nine months of FY23, taking the total to 17,225 with total area of operations at 60.2 million square feet.

Jio’s aggressive 5G expansion to keep capital expenditure elevated

Jio’s focus on aggressively expanding its 5G coverage across the country is likely to keep the telco’s capital expenditure elevated, say analysts. Jio has so far launched 5G services in over 400 cities across the country.

“We expect their (Jio and Airtel) capex to remain elevated in Q4 FY23 and may increase further from previous quarters,” Motilal Oswal said.

Jio targets pan-India 5G coverage by December 2023, with a total capex outlay including spectrum costs of ₹2 lakh crore.

In terms of operational metrics, Jio is expected to increase its average revenue per user (ARPU) in the range of ₹179-181 from ₹177.2 in Q3 , while its subscriber additions are expected to be between 5.5-6.5 million.

Key growth drivers for RIL

Amongst the key aspects to watch out for in Reliance’s March-quarter earnings would be the company’s commentary on the demerger of Jio Financial Services, uptick in its O2C business, tariff hikes if any and retail store additions.

Reliance’s ability to make large investments, the upcoming demerger of Jio Financial Services, the growth prospects in its consumer-facing businesses of telecom and retail– all of these make for a strong bull case scenario for India’s largest company by market capitalisation.

Improving margins in the petchem business and Reliance’s upcoming new energy business are two other aspects to look out for, according to global brokerage UBS.

“In an increasingly capital-scarce environment, RIL’s core strength of investing large amounts of capital in growth projects is a key positive,” JP Morgan said.

However, the brokerage underlined that Reliance’s initiatives like new energy will take 12-18 months to emerge as an important aspect of an investment case.


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